Confectionary Attracting Investment

Mexico | Food & Drink | Fri Feb 01, 2013

Similar to other markets in Latin America, Mexico's confectionery sector benefits from a young population, with 55% of Mexicans aged under 24. This is the main driving force behind our growth forecasts, along with the further spread of convenience stores throughout the country. On account of the wider economic slowdown, confectionery sales fell in 2009, butrebounded in 2010. Between 2012and 2016, value sales are forecast to increase by a further21.7% (in local currency terms), driven by the popularity of major brands and the demographics of the population. Within thecorechocolate sector, we are forecasting growth of22.2% (see chart). This represents a compound annual growth rate of 5.1%.

Good Growth Ahead

Mexico Confectionary Sales (MXNmn) - Historic & Forecast

Confectionery growth is supported by continued investment. In early 2009, Swisschocolate giant Barry Callebaut opened a new factory in northern Mexico capable of producing 100,000 tonnes of chocolate a year. At the same time, Colombia's largest processed-food producer, Grupo Nacional de Chocolates (now Grupo Nutresa), announced plans to acquire Mexican chocolate manufacturer Nutresa for US$95mn. Meanwhile, in 2010 Cadbury's Mexican division invested US$50mn to expand its plant in Puebla state, and revealed that over the last five years the company had invested US$200mn in its Mexican facilities and that 2010's investment was todevelop a new chewing gum line.

In addition to the growing domestic market, Mexico is also now a major exporter of confectionery, with the industry catering for the US, Central American and Caribbean markets. The US is the most important export destination and this trade is growing in size following the full implementation of the North American Free Trade Agreement. This investment is part of a pattern of investment in the sector. For example,in January 2008, confectionery giant Hershey announced it was to close a number of plants in the US and open a new factory in Monterrey, Mexico.Confectionery firms are opening facilities south of the border for the lower factory-worker wages, as well asforlower rent and ingredient costs.

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